Trade War Watch: Truce Ends, Tariffs Up, Talks Resume, Trump Tweets

Following an announcement that trade discussions with China had effectively broken down, President Donald Trump increased tariffs on $200 billion in goods from the country on Friday. The White House also issued an ultimatum, saying Beijing had about a month to reach an agreement before the U.S. enacts another 25-percent duty on $325 billion previously unaffected Chinese imports.

White the trade war has been in full swing for most of Trump’s time in office, the White House had indicated that discussions with China were progressing at the start of May. That changed after the People’s Republic returned a modified trade agreement that removed much of the legal language that would have made it binding while reneging on other aspects U.S. negotiators already assumed were settled. President Trump cited the backtracking as the primary reason for imposing a new round of tariffs.

Fortunately, the U.S. International Trade Commission said the tariff hike would only affect $2.3 billion worth of automotive goods — ranking them 10th on the list overall.

Limited for our purposes to motor-vehicle parts, the Trade Commission’s complete register of tariffed items included things like wheels, bumpers, shocks, door assemblies, radiators, gaskets, and seats. While this will assuredly raise the price of such components, potentially resulting in higher MSRPs, the real threat could come from retaliatory tariffs that focus specifically on American-made cars. China has made it intentionally difficult for U.S. automakers to ship vehicles by boat in the past and there’s little reason to think it will abandon that strategy now.

While China often looks like the bad guy, that’s partially the product of having the home-field advantage. China has disputed the characterization that it has reneged on its trade commitments while trying to show the U.S. as a bit of a bully — a claim that is not helped by U.S. Trade Representative Robert Lighthizer’s aggressive style. Regardless of what we think, it has created distrust on all sides.

“There’s definitely disappointment and frustration [in China]” Zhu Ning, deputy director of the National Institute of Financial Research at Tsinghua University in Beijing, said in a recent interview with Bloomberg. “We thought we were on a good path of making progress and having a deal.”

Officially, things have already turned a corner and the two countries are back to business. But the underlying animosity is palpable. “Talks with China continue in a very congenial manner — there is absolutely no need to rush,” the U.S. president said on Twitter Friday morning, before trade discussions resumed. “In the meantime we will continue to negotiate with China in the hopes that they do not again try to redo deal!”

From Bloomberg:

Treasury Secretary Steven Mnuchin described Friday’s discussions as constructive as he left the U.S. Trade Representative’s office. Chinese Vice Premier Liu He, the top negotiator who led the talks in Washington, told reporters at his hotel that the talks went “fairly well.”

Yet several people familiar with the discussions said little progress was made during a working dinner on Thursday and in Friday morning talks. Liu didn’t come prepared to offer much more in the way of concessions, one of the people said.

Liu and his delegation were expected to leave Washington on Friday afternoon, according to a person familiar with their planning.

However, U.S. officials seemed unsure whether Liu even had the authority to make formal commitments at this point. Internal debates regarding Chinese law were cited as one of the contributing factors for China’s alterations to the draft agreement. But it’s unclear whether or not those disputes have been resolved as of Friday.

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